In an update presented to the board this month, staff said the district’s unrestricted general fund expenditures increased by $2,505,839, while revenues were bolstered by $1,531,179, between the adopted budget on July 1 and the first interim period ending October 31. While the district was down about $974,660, the projected fund balance jumped from $21,920,011 in July to $28,176,109 in October due to more than $7 million added to the 2023-24 beginning fund balance from the 2022-23 school year’s ending fund balance.
Aside from the year end transfer, revenue in the first interim budget increased by $48,000 from other local revenues, such as increases from the Malibu Fundraising Entity and the Santa Monica Education Foundation. A $1,483,179 decrease in local general fund contributions to special education and routine restricted maintenance account also served as a revenue increase.
The main reason for jump in expenditures was an increase in both statutory benefits (by $134,403) and employee health benefits (by $1,953,873). Santa Monica-Malibu Unified School District (SMMUSD) Assistant Superintendent Melody Canady said the hike was actually good news as it was only an 8% rise in benefit costs as opposed to a 20% increase that the district would have paid if it had stayed with its previous insurance system.
Another expenditure increase came from services and operating costs, including a $715,000 increase in consultants for the district. Consultancy expenses included $100,000 set aside for a middle school sports athletics coordinator, $353,212 for public school arts districtwide, and $141,000 for children youth and family collaborative tutoring for homeless and foster youth under student services. Canady said the consultants were all deemed necessary in district endeavors.
“The community might ask what consultants do we have … they’re all things that are needed, they’re not anything [where] somebody just went out and said ‘I want [Joe Schmo] to come in here and talk to us about this and that’,” Canady added.
Expenditures were still on the top of mind for board members such as Jon Kean, who remarked that spending should be “openly addressed” with the community and that the board should continue to “justify” what the district is using its revenues for.
“To me, the number one job of this board is to make sure we have a responsible budget … I’d love more budget conversations,” Kean said, who requested that the board should have more conversations going forward on budgetary matters.
For the restricted general fund (money that can only be used for specific projects), revenues increased by $7,584,140 and expenditures jumped by $6,273,217; leading to an increased fund balance from the changes of $1,310,923. The increase was once again due to the 2022-23 ending fund balance being added to the 2023-24 beginning balance.
The district received a $5,048,982 increase in state projected revenue and States CARES Act Covid-19 funding, including a $1.6 million increase in the Arts Music and Instructional Materials Discretionary Block Grant and a $1.1 million increase in Educator Effectiveness. Over $2.8 million was increased in federal revenue funding, while more than $1.1 million was added from projected revenue from PTA, Booster Club and gifts for carry over balances. The largest expenditure increase was over $4.1 million in books and supplies, along with “learning recovery items” from Covid-19 per a Board-adopted resolution.
Director of Fiscal Services Gerardo Cruz gave the board a deeper look into ending fund balances, also known as the reserve balance, which lags behind comparatively to the statewide district average. Factoring in a $6,705,744 deficit in the current school year, as well as a $5,202,073 audit restatement and adjustments from the 2022-23 budget, the district’s ending fund balance is at $22,974,036 for the December interim period. Taking out a mandatory 3% reserve for economic uncertainties, the district has $16,662,423 on hand as reserve for up to two months of general fund expenses. The current reserve, equal to 10.95% of total general fund expenditures, is well behind the approximately 25% reserve that basic aid districts like SMMUSD should possess. A proper two-month reserve for the district would be $26.8 million, with the dwindling district reserve explained by a jump in salary schedules as well as the expenditures.
Ultimately, the interim report was considered a “positive certification,” which means the district will be able to meet its obligations in the current fiscal year, as well as two subsequent years.
thomas@smdp.com
